For some time now, CAP's management have been spruiking "Right Product, Right Time" referring to Hawsons high grade and the increasing demand for high grade ore.
Over the years I have googled to try and verify what CAP management was saying about the increasing demand for high grade ore. A few years ago, the best I could do was find a few references in mining/steel industry specific websites or articles.
Over the last year or so, the premium being paid for high grade ore has increased over benchmark 62%. And now the talk about ore's aint ore's seems to be in the mainstream media and how this is a more of a structural change that is here for the long term. The only debate now seems to be about how high the premiums will be over the long term, but it seems premiums are here to stay.
I am making this post for two reasons.
Firstly, because I know that sometimes you only see what you look for (you buy a colour/model car because its different, and then you seem them everywhere). I know I am looking for information that supports what I want to see and hear about high grade ore premiums. If others are of a different view or know of contrary (and hopefully credible) information, then I would like to consider it.
Secondly, for those who may not have considered this, but want to understand what I am seeing and thinking about the rarity and value of Haswons Supergrade, I have posted some links below to articles that give a good summary of the reasons for the demand and premiums for high grade ore.
However, I think that one of the best arguments in support of the demand and value for Hawsons Supergrade, is that Mitsui have just committed $5.4M to help fund a BFS in a project that they have NO Equity in. What do they get for their A$5.4M - an option. The option allows them to buy 2mtpa of Hawsons Supergrade at market price (no discount) and they need to commit A$60 million in funding for construction. That's a big commitment just to get access to product.
Articles are below.
* Australian Financial Review article. Whilst it starts with discussion about FMG's issues with low grade ore and how everyone else disagrees with their view on premiums and discounts, there are good comments from RIO etc explaining how things are changing in China.
I'm interested to know if you agree or disagree. Are FMG the only one's thinking pricing will go back to the old ways? If not, its a really good positive for CAP and Hawsons Supergrade
CAP Price at posting:
8.7¢ Sentiment: Buy Disclosure: Held
